Partner of the Homes-up project

ifo - Leibniz-Institut für Wirtschaftsforschung

The ifo institute examines the impact of demographic change on supply and demand in the market for single family homes. Rural areas with a large share of single family homes have to adapt to a shrinking population. There are hardly any price adjustments as a response to the lower demand and as a result many houses are vacant. There is also reason to believe that public intervention may distort prices in the real estate market. This subproject aims to address three issues:

the impact of sparse population on the cost of infrastructure provision,

the importance of psychological factors to the determination of prices in real estate markets,

the impact of transaction taxes on the number of transactions and prices of single family homes.

We approach these issues empirically with data on German municipalities with different population densities, with the help of theoretical framework under behavioral economic assumptions and in an empirical investigation of real estate transactions in German states with different property transfer taxes. The subproject aims to clarify how prices adjust in the real estate market. This knowledge may serve policy makers as a basis for meeting the challenges of demographic change.